Correlation Between Norsk Hydro and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro and Scandinavian Tobacco at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Norsk Hydro and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norsk Hydro ASA and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Norsk Hydro and Scandinavian Tobacco and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Norsk Hydro with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and Scandinavian Tobacco.
Diversification Opportunities for Norsk Hydro and Scandinavian Tobacco
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Norsk and Scandinavian is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Norsk Hydro is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Norsk Hydro ASA are associated (or correlated) with Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Norsk Hydro i.e., Norsk Hydro and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Norsk Hydro and Scandinavian Tobacco
Assuming the 90 days trading horizon Norsk Hydro ASA is expected to generate 1.28 times more return on investment than Scandinavian Tobacco. However, Norsk Hydro is 1.28 times more volatile than Scandinavian Tobacco Group. It trades about -0.02 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.11 per unit of risk. If you would invest 580.00 in Norsk Hydro ASA on September 13, 2024 and sell it today you would lose (20.00) from holding Norsk Hydro ASA or give up 3.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Norsk Hydro ASA |
| Scandinavian Tobacco |
Norsk Hydro and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and Scandinavian Tobacco
The main advantage of trading using opposite Norsk Hydro and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro position performs unexpectedly, Scandinavian Tobacco can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| Norsk Hydro vs. Aluminum of | Norsk Hydro vs. Games Workshop Group | Norsk Hydro vs. SLR Investment Corp | Norsk Hydro vs. WisdomTree Investments |
| Scandinavian Tobacco vs. HomeToGo SE | Scandinavian Tobacco vs. Gruppo Mutuionline SpA | Scandinavian Tobacco vs. SIEM OFFSHORE NEW | Scandinavian Tobacco vs. Taylor Morrison Home |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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